The Wonk Room

McCain Health Plan Would Allow Companies To Provide Skimpy Benefit Packages To Lower-Wage Employees

Yesterday, an independent study published in Health Affairs concluded that Sen. John McCain’s (R-AZ) health care plan would undermine employer-based health coverage, insure just one-million more Americans, and increase costs across the board.

And while some employers would still offer health insurance, McCain’s prescription could allow large firms to discriminate between workers and provide different benefits to high-and low wage employees.

Currently, “to qualify for the tax subsidy” — which shields health benefits from taxes — “employers must abide by IRS nondiscrimination rules, which require firms to provide similar benefits to high-and-low wage employees.”

In short, “all benefits provided for participants who are HCEs [highly compensated employee] are also available to all other participants. All benefits for dependents of HCEs must also be available for the dependents of all other employees.”

But McCain’s health care plan may undermine this protection. By eliminating the current tax exclusion for employer-sponsored coverage, McCain would erode the tax incentive that encourages large employers to provide their workers with identical benefit packages.

With income inequality at an all time high, McCain’s plan could create a new ‘health care gap.’